Canada-US pipeline on hold amid oil's recent woes

The steel is staged, and
crews are waiting to lay the last and most expensive leg of TransCanada
Corp.'s multibillion-dollar pipeline network that would carry Canadian
oil to refineries along the Gulf Coast.

Yet final U.S. government
approval for the massive project, once assumed to be on a fast track, is
now delayed indefinitely, with little official explanation. The company
had hoped to begin laying pipe by the end of the year, but those
prospects have dimmed.

Some experts conclude the negative
publicity surrounding oil-related disasters, particularly the offshore
BP leak that polluted the Gulf Coast for months, has made the Keystone
XL pipeline a victim of guilt by association.

"I think it's fair
to speculate that BP fouled the nest for TransCanada," said Richard
Fineberg, a pipeline analyst with Ester, Alaska-based Research
Associates. "There is much more attention to the industry and its dark
side. It's going to be harder to get things done at this moment."

If
the Calgary-based company is battling poor timing on this leg of the
project, it enjoyed much better timing during the previous leg. The
Keystone pipeline — separate from Keystone XL albeit part of the same
3,800-mile underground network — sailed through the approval process
when Americans were clamoring for the government to do something about
record gas prices.

The delay is frustrating for some business and labor leaders who were counting on the new revenues from the pipelines.

"I
think all that safety stuff has already been done by now. Let's do
something," said Ken Mass, president of the Nebraska AFL-CIO.

The
massive pipeline network — about five times the length of the
trans-Alaska oil pipeline — is designed to move 1.5 million barrels of
Canadian oil daily to U.S. refineries.

TransCanada won approval
two years ago for the first Keystone pipeline, which carries crude oil
across Saskatchewan and Manitoba and through North Dakota, South Dakota,
Nebraska, Kansas, Missouri and Illinois.

Oil began coursing
through the 36-inch Keystone pipeline in June, and it appeared that
permitting and construction would go as slickly for TransCanada's
Keystone XL. That $7 billion leg of the system is designed to carry
crude oil from tar sands near Hardisty, Alberta, to the Gulf Coast via
Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas.

Because
both pipelines cross the U.S.-Canadian border, presidential permits
from the State Department are required. But department officials have
given no signal about when they might approve the final permit for
Keystone XL, despite enthusiastically touting the Keystone pipeline as a
project with little opposition when it was at this stage three years
ago.

"I don't know that it was expected to take this long, but
it's not a simple process," State Department spokesman Bill Cook said
last week. "It's cross-border, across several states, and all these
interests have to be reconciled."

In April, the State Department
published a draft report giving the Keystone XL pipeline a favorable
environmental score, but that was just days before the Gulf Oil spill
hit. Other oil-related disasters followed, including Enbridge Inc.'s
broken pipeline that spilled hundreds of thousands of gallons of oil
into the Kalamazoo River in Michigan.

Some elected officials and
federal agencies have expressed skepticism about the positive
environmental findings. The Environmental Protection Agency called the
State Department's review inadequate, while the Department of Energy
concluded Keystone XL couldn't act as a safeguard against global price
shocks.

Crude for the pipeline comes from oil sands, a tar-like
bitumen that is mined or extracted by using steam injected in the
ground. Refining the oil creates more greenhouse gases than traditional
crude, leading opponents to argue that it doesn't justify the fuel
produced.

Sen. Mike Johanns, R-Neb., sent a letter last week to
Secretary of State Hillary Clinton questioning whether alternative
routes were considered that would have been less environmentally risky.

House
Energy Chairman Henry Waxman, D-Calif., has argued that using crude oil
from the Alberta tar sands would increase greenhouse gas emissions.

TransCanada
insists the pipeline won't harm the environment but will deliver a
dependable source of oil to the U.S. from a friendly trading partner.
Still, company officials acknowledge recent oil spills have brought more
scrutiny to Keystone XL.

Keystone spokesman Terry Cunha said the only difference between the two pipelines is the routes.

"It's the same kind of pipeline and the same kind of oil," Cunha said.

Not
everyone is alarmed by the delay. Kevin Cramer, chairman of the agency
that regulates North Dakota's pipeline industry, speculates offshore
drilling fears may actually help get Keystone XL and other U.S.
pipelines built.

"I think we will be seeing a lot more onshore
investment and that onshore crude would be coming to the same ports that
the offshore crude would be coming," said Kevin Cramer, chairman of the
North Dakota Public Service Commission.

Opponents of the Keystone
XL project describe the 1,980-mile pipeline as an ecological disaster
waiting to happen, and land owners are angry that TransCanada has
threatened to use eminent domain to obtain the easements it needs for
the project.

"We really see this pipeline as a problem that's bad
for people at every step of the route," said Alex Moore, spokesman for
Friends of the Earth.

TransCanada says Keystone XL would inject
more than $20 billion in new spending into the U.S. economy and about
$585 million in state and local taxes to the six states along the
pipeline's path.

Some residents still aren't convinced, including
Janie Capp, whose eastern North Dakota farm sits above the Keystone
pipeline. She calls the entire system a "risky experiment."

"Anything manmade will eventually leak: a garden hose, a hose on your car or your plumbing," she said. "Everything will leak."